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Indonesia's biggest banks seem to have done good business in the third quarter of 2018. After the positive Q3-2018 corporate earnings of Bank Mandiri that were released earlier this week, another major bank in Indonesia - Bank Negara Indonesia (BNI) - now shows similar positive numbers.
Two banks, both state-controlled but listed on the Indonesia Stock Exchange, stand out in terms of assets. Both Bank Rakyat Indonesia and Bank Mandiri control assets that exceed IDR 1,000 trillion (approx. USD $69 billion) per 30 June 2018.
At least 11 listed companies on the Indonesia Stock Exchange announced that they are ready to payout dividends to shareholders in the upcoming March-April dividend season. However, the traditional dividend season also implies rising pressures on the rupiah exchange rate as a significant number of shareholders are foreign investors.
One of Indonesia's largest banks, Bank Negara Indonesia (BNI), reported a 20.1 percent year-on-year (y/y) increase to IDR 13.62 trillion (approx. USD $1.0 billion) in consolidated net profit in full-year 2017. This strong growth pace came on the back of a 12.2 percent (y/y) increase in credit growth to IDR 441.3 trillion (approx. USD $32.9 billion).
Several big state-controlled banks in Indonesia posted double-digit profit growth in the third quarter of 2017, extending the positive corporate performance that was posted by these banks in the preceding quarters. This performance comes on the back of sliding reserves in line with rising credit growth, an improvement in the quality of banks' loans and lower non-performing loan (NPL) ratios.
The big Indonesian banks that are listed on the Indonesia Stock Exchange (IDX) have seen their shares surge so far in 2017. Moreover, their share performance is expected to retain this momentum in the second half of 2017. Among the big banks Bank Danamon Indonesia is leading the race. Its shares have surged 34.77 percent so far this year, followed by Bank Rakyat Indonesia (+27.62 percent), Bank Negara Indonesia (+26.70 percent), Bank Mandiri (+16.85 percent), and Bank Central Asia (+18.39 percent).
A number of Indonesian big cap stocks have already released their first quarter 2017 corporate earnings. Most of them show good results and therefore the majority of analysts agree that full-year 2017 corporate earnings of Indonesian companies listed on the Indonesia Stock Exchange should, generally, be good, especially considering economic growth of Indonesia is expected to accelerate further in the remainder of the year. However, some stocks have become expensive particularly after the recent strong performance of Indonesian stocks.
After having experienced overall weakening corporate earnings in 2015, Indonesia's largest companies saw rising net profit in full-year 2016 (in line with Indonesia's accelerating macroeconomic expansion last year). Of the ten biggest Indonesian companies (biggest in terms of largest market capitalization on the Indonesia Stock Exchange) only cigarette manufacturer Gudang Garam is yet to release its full-year 2016 financial results. The combined results of the other nine showed a marked improvement from the situation one year earlier.
In 2016 listed companies on the Indonesia Stock Exchange have a more expansive attitude compared to the preceding year, reflected by plans to raise capital expenditure. Plans for business expansion are supported by Indonesia's expected accelerating GDP growth in 2016, people's improving purchasing power, government-led infrastructure development (that should cause a multiplier-effect in the Indonesian economy), and the economic reforms that are set in the series of economic stimulus packages that have been released by the Indonesian government since September 2015.
Shares of Indonesian banks were hit hard on Friday (19/02) after Indonesia's Financial Services Authority (OJK) announced its plan to push state-owned banks net interest margin (NIM) to the range of 3 to 4 percent in a bid to lower the country's lending rates, hence boosting credit growth. NIM is the difference between interest income generated by banks and the amount of interest paid out to the lenders. A higher NIM implies that banks are more profitable. Currently, the average NIM for Indonesia's state-owned banks is between 7 - 8 percent.
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Since Friday (25/08) many Indonesians are having trouble to use ATMs (for withdrawing money and conducting various payments). Last week the Telkom-1 satellite started to suffer technical difficulties as a shift on the satellite's pointing antenna disrupted transponders. Considering most of Indonesia's major banks use this satellite, owned by Telekomunikasi Indonesia, for their telecommunication network, thousands of ATMs - hence millions of Indonesians - are affected.
The corporate earnings of Bank Negara Indonesia (BNI) up to the third quarter of 2016 are in line with expectations. Net income of Indonesia's fourth-largest lender (by assets) rose 28.7 percent (y/y) to IDR 7.7 trillion (approx. USD $529 million) compared to net income in the same period one year earlier (IDR 5.99 trillion), supported by a 21 percent (y/y) increase in credit disbursement to IDR 372 trillion (approx. USD $28.6 billion) and the higher net interest income margin (6.2 percent).
Bank Negara Indonesia (BNI), one of the leading banks in Indonesia, is expected to maintain rising net profit figures in the years ahead due to its decision to focus on (corporate) credit disbursement for domestic infrastructure development projects. In fact, according to RHB OSK Securities, BNI may become the state-controlled bank that benefits most from the government decision to raise its infrastructure budget to IDR 313.5 trillion (approx. USD $24 billion) in the 2016 State Budget. Last year, growth of credit disbursed by BNI to infrastructure projects climbed 116.2 percent (y/y). This year infrastructure credit may grow by another 19 percent.
At least 17 Indonesian companies listed on the Indonesia Stock Exchange (IDX) have announced to pay out dividends to shareholders for the financial year 2013. The payouts will be conducted between 23 April and 30 June 2014. These dividend payout announcements are expected to have a positive impact on the performance of Indonesia's benchmark stock index (known as the Jakarta Composite Index or IHSG). However, the payout is usually followed by a short period of profit taking as investors sell certain stocks.
The position of consultant, tasked to conduct a feasibility study for the Jakarta-Surabaya toll road, will be tendered in early 2014. The realization of the Jakarta-Surabaya toll road, a 775 kilometer-long toll road that is built above the sea (along the coast line between Jakarta and Surabaya), is an ambition of the Indonesian government and expected to ease the difficulty of transportation on Java, Indonesia's most populous island. The feasibility study should explore the technical and environmental framework related to the establishment of the toll road.
In order to improve Indonesia's intra-island connectivity on Java (and thus reduce logistics costs that are due to fragile infrastructure), the government is planning to build a toll road above the sea from the capital city of Jakarta in the western part of Java to Surabaya in East Java. Both these cities are Indonesia's centers of industrial productivity and economic growth. The 775 kilometer-long toll road, which is expected to cost about IDR 150 trillion (USD $13.3 billion), will be build by a consortium of 19 Indonesian state-owned enterprises.
